Inexplicable forces in flour trade

March 9, 2015
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by Morton I. Sosland

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This is not the first era in global trade in wheat flour where much of what is happening could be best described as mysterious. After all, as distinct from times when North American and European mills competed to ship flour to distant destinations in urgent need of supplemental food, often as emergency aid, much of current business for several years running has been within a fairly narrow band of exporters and importers. Many are located in a part of the world smacking of intrigue as well as economic and political influences unfamiliar to western observers.

Simply to affirm that Kazakhstan and Turkey shift back and forth in the number one and two positions as leading global flour exporters raises questions. After all, neither country ranked as a significant shipper of wheat flour as recently as the start of the present century. That they now annually account for more than 40% of global flour exports, in some crop years nearly as much as 50%, gives a dominance that no country previously enjoyed.

Insights into this role, how it unfolded through the development of domestic milling industries as well as encouragement of mill equipment manufacturing, are best obtained through market reporting of the International Grains Council (IGC). The Council, based in London and supported by member governments, indicates that export volumes of these two nations are driven primarily by the availability of milling wheat supplies, grown domestically and even imported. Indeed, one of the most surprising aspects of the current export flour trade is the degree to which it is affected, not by the level of demand from importing nations but by whether an exporting supplier has enough wheat to allow unlimited flour shipments.

Both Turkey and Kazakhstan recently have had to curtail shipments, according to the IGC. These shortfalls, due to disappointing local harvests, have opened the way for cross-border trade on the part of Pakistan, especially when that nation grew sufficient wheat. Pakistan and also India, two nations often defined by the centrality of wheat foods to their diets and even by periodic shortages, are now counted among “new” exporters emerging in the 2000s.

Limits on export flour trade imposed by governments seeking to protect domestic wheat supplies are not confined by any global area. Argentina has been especially cautious about allowing export flour shipments to Brazil at a time when concern ruled about the size of its 2014 crop. Rather than reaching out for new flour import sources, Brazil increased its own production with a good-sized crop.

Hardly any nation defines better the mysterious ways in which export flour trade is evolving than the island country of Sri Lanka. Growing little or no wheat locally, Sri Lanka has seen its milling capacity built to the point where it is importing sizable quantities for grinding into flour for export to importers like Indonesia. This is a development harkening to when Cuba, also a non-producer of wheat, saw expanding investment in its milling capacity to the point threatening the maintenance of export flour markets in the Americas.

If more than a few of the trends unfolding in flour exports appear economically inexplicable, then it’s not hard to apply the same description to imports. Two countries have led flour importing for some years, each accounting for slightly more than 10% of the world total. They are Uzbekistan, which has a population about double that of its flour-supplying neighbor, Kazakhstan, and Iraq, with a domestic milling industry impacted by both internal and external fighting. A third country vying for about the same share of flour trade is Afghanistan, where military conflicts have dominated for decades.

Even with all of these unpredictable influences, global trade in wheat flour has been well maintained, within reach of new records. Accounting for a small share of world flour production, exports continue as bit of spice in the unfolding expansion of world flour consumption.